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tv   Worldwide Exchange  CNBC  August 20, 2013 4:00am-6:01am EDT

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welcome to "worldwide exchange." i'm carolin roth and these are your headlines from around the world. the pain continues in emerging markets with indonesia stock market plunging for the second straight day, while india's central bank supports their rupee yet again. glencore xstrata shares dip after the mining giant takes a larger than expected $7.7 billion writedown on mining assets in the first half. and bhp billiton's cost cutting efforts fail to save it from sliding prices and an earnings miss put the miner presses on with its push into
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pot ash. and the german vice chancellor and head of the fdp party tell cnbc exclusively that the ruling coalition is right for germany. also holding the title of economy minister, he lays out his support. >> it is hard for me to show there are no burdens for corporates or german smas. that means no increase in the substance taxes. energy has to be affordable. good morning, everyone. emerging markets once again in focus today with the indian rupee falling to a record low and indonesia selling off quite sharply again today. adam is in singapore with the details. adam? >> thank you very much. it was a particularly ugly picture in southeast asia. the epicenter of where the sell-off was actually happening here today. the market you just mentioned,
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falling heavily for the second straight day, taking the combined two day losses beyond the 10% mark for this equity market, currently still trading. off 244 points across the board. the market players in indonesia seem to be a lot concerned about the sell-off we're seeing. and state pension funds, two of them said they plan to increase their purchases of equities as equity markets are selling off here. they say the sell-off has nothing to do with the fundamentals of some of the companies in indonesia. in the meantime, investors also continuing to take aim at some of the other mash rkets. thailand suffering, malaysia suffering, and even here in singapore, market that is, pretty much a developed market and aaa-rated in terms of the sovereign, also getting hit because a lot of the companies in singapore are tightly tethered to the southeast asian region. now, the sell-off in the emerging markets also affecting india as you just mentioned. however, we did see some bargain hunting in that marget after the
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index fell over 1 plus percent, sitting down by .3%. this after jpmorgando downgrade the market to overweight. in the meantime, that setting in the emerging markets, it did affect the bigger markets in north asia. look at the hang seng off by 2.2% there. and even the shanghai composite, that had been in positive territory at the early part of trading session, also dipped into negative territory, even though we saw some bright signs in terms of jpmorgan lifting its rating for that market. in the meantime, the markets in north asia, the kospi in regular territory but the sell-off, you know, really affecting the sentiment in the developed markets. the biggest market in north asia, nikkei 225. saw some model losses this morning, but the acceleration in the emerging market space affected that one, put together with the strength in the yen,
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which i believe has us at the 97 level. that affected the stocks. every single secretarier y er s nikkei 225 in negative territory. all of this due to what with the fed tapering. >> it looks like indiscriminate selling in the asian tradie ini session and we have taken the cues from wall street and asia with the european trade off 1% for the stoxx europe 600. it is pretty clear investors are running for cover on the back of those fed tapering concerns. take a look at the individual indices. seeing big declines for the ftse mib in italy. this was the big performer yesterday on the back of political uncertainty. ftse 100 doing a little better, but up around .9%. couple of stocks we're focusing on today and the basic resources space, which is the biggest decliner in terms of the sectors here in europe, bhp billiton
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missing forecasts with a 15% fall in half year profit and the company said it will slow down a long awaited move into pot ash to curb spending over the next four years. glencore xstrata shares off by 3%. this company wrote down the value of assets inherited from xstrata by some $7.7 billion. this is more than expected, and it announced a 9% drop in core profit in the first set of full results since the commodities group was created. on to some better news in switzerland and chocolate. shares of lind and sprungli were sweetened, sales up by 8.7% in the first half of the year. and shares, as you can see, up by 2%. m&a news to tell you about. german profit group deutsche bund offered an all share bid
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for gsw. the deal would create a company focused on thriving real estate market in berlin and gsw up by 7.87%. in the bond markets, we're still seeing yields at fairly elevated levels at two-year highs for ten-year treasuries and saw two-year highs for the 30-year space. the yield still above 2.8%, it was as high as 2.9% in yesterday's trading session. same goes for the ten-year gilt yields, still close to the two-year high at 2.7%. keep in mind, we do see a spanish bill auction later on today. spain selling some 6 and 12-month paper, worth 3 billion to 4 billion euros. in the forex space, the g-10 currencies, we have been seeing a lot of movement in the southern hemisphere. australian dollar against the greenback, it is actually down by .7%, more selling pressure as the rba left the door open for
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further rate cuts. sterling dollar pretty steady this morning at 156.58. on the german campaign trail, the social democrats are in damage control mode, trying to clarify their tax hike pledge. this is after leader said it could be reversed if initial crackdown on tax evaders were successful. elsewhere, chancellor merkel's campaigning took a turn yesterday when she was forced to cancel a rally after a nine-hour hostage standoff took place in the same town. the hostage taker will today face a judge to decide if he'll be jailed or sent to psychiatric hospital. but, again, meanwhile, our very own annette has been talking to the leader of the liberal party who is also the vice chancellor of germany. annette, just want to clarify that the hostage situation had
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actually nothing to do with angela merkel. we have got that out of the way. what did he say? >> he is very preoccupied about being re-elected as they're fighting for the 5% threshold and only if they're gaining more than 5% of votes, then they can as well form a government with angela merkel's ruling cdu. there is a lot of insecurity. and as well it should be quite clear that angela merkel's cdu should go together with liberals if they gain enough votes. but let me introduce you to the interview i've done with mr. rosler. i was starting off in asking him what are his plans to keep that country here, germany, in such a good economic state, so take a listen to what he said. >> translator: first of all, the government and the ruling coalition should stay as they are. of course we need to keep on
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working at the important questions, just take the topic of budget consolidation. we can see just how important solid state finances are for solid growth across europe. at the same time, we need to assure there are no burp for corporates or german smes. and energy has to be affordable. the scarcity of skilled labor is an issue, especially in the tech industries. >> looking at different things from angela merkel, there are some doubts if she's committed to a commission with your party, the liberals. what is your feedback from angela merkel? >> translator: we're relaxed. it is clear all the leaders in cdu with angela merkel in the helm have recently made it clear that backing the very successful cdu liberal coalition. if we get enough votes, we get enough votes. that's not a question of sympathy. you have to look at the numbers. germany is doing well. germans are doing very well.
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and our government is doing everything it can for this to remain the case. >> currently you're treading all over germany to meet entrepreneurs and big companies. what is your feedback from those people? what do they really want from politicians right now? >> translator: people want us to continue running our budget in a solid way and for there to be no further liabilities. we have to take care of the energy prices are affordable. we need to fight the scarcity of skilled labor in germany. these are the big issues which preoccupy entrepreneurs in the middle. but above all, people don't want to be pat ronnized, not only in their private lives but also business lives. social democrats in the greens represent state paternalism for collective thinking, which goes as far as the vegetarian day, our current example. that motivates us, but also the people not to vote red/green and makes us strong during this election campaign and hopefully also on september 22nd. >> and quite a bit of color, i'm going to discuss with alexander
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shoem schumann, the chief economist, how german companies are really doing. thank you for joining us. my first question already said it, what are you hearing from your member companies? >> at the moment we hear some kind of criticism that we have worrying election campaign. maybe this is true for the campaigning itself, but the election is really a decisive moment above all for german economy. a lot of projects have not been done over the last three years due to the fact that euro debt crisis dominated the political agenda. and we need more reforms in the next four years. above all the highest risk companies name us here in germany is energy prices. so energy prices a huge concern. we made after fukushima this u-turn, but we did this on the basis of system of administrative prices and this created costs year by year of 20 billion euro.
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we have to change this. we need a more market oriented system of energy price building and another thing, huge thing for businesses in germany is the scarcity of labor. >> let's tackle the thing about economic growth. i mean, everybody was thinking that economic growth was coming back in the second half of this year. do german companies feel that we're guarding the experts. >> last week, we got some signs of hope from the eurozone, the gdp second quarter was quite well. for germany, they were surprisingly well. but this was also due to the fact that we had a weak start into the year. and now we have some kind of catching up effect in the second quarter for the second half of the year. we also count with robust growth, but not an overwhelming growth rate. we are -- our estimation for growth rate for this year is 0.3%. also the bundesbank and the
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current report is saying that the growth is good, but it is not so good as it should be or as it could be. >> yeah. looking a bit more in the future as well, after the german elections, what are these companies -- what do they really want from politicians was the question i posed to mr. rosler. do they want lower energy prices? do they want more skilled labor? what is on top of their priority list? >> on top of their priority list is in fact energy prices. so germany gets more and more into a kind of sandwich position. we have lower wages in the eastern parts of the world, and now we have lower energy prices in the western parts of the world. and our competition situation of germany is getting worse due to this fact, and so we need to shift in energy policy, but we also need more reforms to more
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qualified labor, to education system, and also infrastructure. we need more -- more money spent in infrastructure and less in public consumption. >> does the german government do enough to get skilled labor from outside germany. you don't really can tackle the low fertility or low birth rate problem in the country, but you can lure people into germany. are they doing enough? >> we are knowing that there are three potential to tackle this problem. first is to get more women into work. the second is that we work longer. and the third thing is that we get more -- other people from other countries to germany. so we are hearing a lot of spaniards, portuguese, come to germany now. there is some kind of, let me say so, movement to build a really european labor market and this is going on.
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and policy could foster this development. >> thank you very much, alexander. well, carolin, that is it from us here in berlin. with that, i'm sending it back over to you. >> annette, thank you very much for that. this is coming up on today's show, the indian rupee continues its free fall, hitting a fresh all time low against the u.s. dollar. can the reserve bank of india stem the sell-off? we cross to mumbai in around 20 minutes' time. protests bubble over fracking in germany and how it might affect the country's famous beer industry. we talk to the german brewer association in berlin at 10:45 cet. and then at 11:30 cet, we cross state side to the heart of the shale gas boom. don't miss out as we both hear both sides of the argument and the great fracking debate. analysts expect more bad news from jcpenney when earnings hit today. we preview the numbers live from new york at 11:50 cet. weaker prices for bhp
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billiton earnings, but the company continues to invest in new projects as glencore xstrata takes a massive writedown on mining assets. we discuss the sector after the break. [ male announcer ] i've seen incredible things. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪
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egypt's interim government has continued to crack down on the muslim brotherhood, arresting leader mohamed badi in cairo. he'll be charged with insighting the murder of protesters. the lawyers of hosni mubarak started legal proceedings for his immediate release. yousuf joins us on the ground with more on cairo. these two factors are only going to complicate matters even more. >> absolutely, karen. it is clear the courts have their work set out for them in the coming few weeks. first off, the arrest of the supreme guide, the top man of the muslim brotherhood. remember, he was charged with inciting murder back in july. the arrest did not materialize until the early hours of this morning. that comes off the back of state television brandishing images of
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his arrest, shows a visibly distraught man, clearly tired, and he will be indicted on those charges. the muslim brotherhood condemned the move. the other development is the possible release of the former president hosni mubarak. now that is according to his lawyer. he says that in a matter of 48 hours, after getting through administrative hurdles he could be released. the fact of the matter is judicial authorities have not confirmed that will happen. there is still a retrial pending on his previous sentence, which is for not protecting protesters. that, again, is unlikely to happen, given the political tension on the ground here, the political impasse. it is going to stir emotions. the military experts tell me it has no interest in supporting an action like that. and also, keep in mind that the conversation is still ongoing about relations to egypt. the government said it will not allow anybody to mettle in
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domestic affairs. the united states is reviewing its aid to egypt. european union will have discussions on wednesday. we understand an arms embargo is on the table, but what is going to weaken any policy decision is the fact that a saudi foreign minister made it clear yesterday that any country threatening to cut off aid to egypt at the largest oil exporter in the world will be happy to -- >> yousuf, thank you for that. cnnoc stood at 38.3 billion yuan. in terms of the forecast, how it is performing against forecasts, for the net profit, this stood at 30.87 billion yuan. so the net profit is better than what analysts were anticipating. cnooc says oil and gas output
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were up 23.1% year on year. and first half oil and gas sales revenue stood at 110.8 billion yuan. bhp billiton's cost cutting efforts and production boost have failed to stop a slide on its profits, excluding one offs. the global mining giant made $6.1 billion at first six months of 2013. that's well below estimates and it amounts to a 30% drop in profit for the year. as weak commodity prices take hold. bhp says it is pushing on with its foray into pot ash. it is investing $2.6 billion in its canadian jansing mine over the next four years, but there is still no start date for production. staying in the sector, glencore xstrata shares are trading lower after the mining giant revealed a larger than expected $7.7 billion writedown on assets inherited from xstrata. the company said that the process of integrating its former rival had, quote, exceeded expectations. the news came as the group posted a near $9 billion net
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loss in the first half of the year. but adjusted profit came in slightly ahead of estimates. joining is warren gilman. warren, thank you for joining us this morning. let's kick things off with glencore xstrata. the asset writedowns, in your view, is that good news? because you feel as though glencore is a kitchen sinking on its investments in xstrata? >> no great surprise in that number. it is a bit of a shock when you see the number, but it is a bit of a financial engineering since the original asset valuations were based on largely what the glencore price was at the close of the merger. so a bit of financial number manipulation there. i'm not too concerned about the headline $7.7 billion number. of course, that's a noncash charge. the problem going forward for glencore is really the
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businesses that it's in and the geographic areas that it's in. glencore is strong in coal, which we all know has been suffering through much of 2013. it is strong in nickel, which everyone agrees is a long-term over supply. it is strong in emerging markets, which everyone is a little bit queasy and uncomfortable with these days. and at the end of the day, it has $35 billion in net debt. that's a very big number in an environment of weaker commodity prices. so a few things for glencore shareholders to have to deal with beyond headline asset impairment number. >> but, warren, overall, you don't think glencore xstrata would be one to review that merger or would actually regret it because we are basically at the end of this commodity super cycle. >> not at all. i think that the xstrata merger was a good thing, both for xstrata and for glencore. they just have to fight their
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way through the management of the business. they are a mining company, so let's get on with it and let's create value. but certainly some head winds to deal with. >> let's talk about bhp billiton. what is your take on the numbers? >> numbers were a bit surprising. on the weak side, given the production data, which was prereleased, number of days ago, were reasonably supportive of the share price. i think people were somewhat marginally disappointed with the actual operating income numbers. leaving that aside, that's relatively small beer compared to what shareholders currently are focusing on, that is more to do with capital management, reduction of capex, higher dividend payments, return of capital to shareholders through buybacks, et cetera. and there really wasn't much good news in the release today from bhp regarding that. they continue to spend, dividend
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growth is relatively slow. capex numbers are not coming down anytime soon. and the capital management seems to be somewhat less than current investors are looking for. so they'll be disappointed with that. >> so, warren, i take it that you're not probably in favor of the fact that bhp is going ahead with that pot ash project. >> depends on your profile and your time horizon. my personal view is one can't manage a mining company and especially a very large and dominant mining company, like a glencore or a bhp and satiate short-term shareholder interest. one has to get on with building the business, building long-term mines for the next generation. so i think that at the end of the day, it is the right decision to make. that still won't stop certain short-term shareholders for selling in the market today, and in the market tomorrow.
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>> even though the price outlook for pot ash has been very, very volatile and remains very clear. but just finally, want to get your overall take on the industry. which miner, which company do you believe is doing the best job in terms of reining in capex, sell off underperforming assets and tackling debt? >> i think bhp is doing a reasonably good job. doing a balance of satiating and satisfying short-term shareholders, but at the same time realizing they have to get on with life and build the business. they are in a diversified segment, unlike rio tentinto wh is becoming more and more focused on iron ore, which i think is a relatively risky strategy. these companies have to get on board with building new mines and that is how they create value. there was an interesting statement made by ivan glassonburg several weeks ago about the risks of building new
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mines and how glencore xstrata was not interested in building green field mines. in my mind, one should never say never. if you're a mining company, you create value by building mines. >> so, warren, essentially bhp billiton isn't doing everything wrong. thank you for the thoughts. warren gilman, chairman and ceo of cef holdings. as part of our special week on climate change, we'll take a closer look at the debate surrounding shale gas. find out why the german brewer association is crying foul over fracking. that's live from berlin at 10:45 cet. we want to hear from you. do the economic benefits of shale gas outweigh the costs? if you want to join the conversation here on "worldwide exchange," get in touch with us by e-mail at via twitter at @cnbcwex or direct to me @carolincnbc. still to come on the show, as the indian rupee and indonesian rupee continue to
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slide, where will it end for emerging markets?
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the pain continues in emerging markets with indonesia stock market plunging for the
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second straight day while india's central bank is forced to support the rupee. glencore xstrata shares dip after the mining giant takes a larger than expected $7.7 billion writedown on mining assets in the first half of the year. bhp billiton's cost cutting efforts fail to save it from sliding prices and an earnings miss, but the miner presses on with its push into pot ash. and the german vice chancellor and head of the fdp party tell cnbc exclusively the ruling coalition is right for germany. also, holding the title of economy minister, philipp rosler lays out his support for the middle. >> translator: we need to show there are no burdens for corporates or for german smes. that means no increase in the income tax rate and no substance taxes. and thirdly energy has to be affordable. after becoming the world's top pcmaker, len nova's next big
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puch push is into the mobile and enterprise market. it is looking to business customers for growth. that's lent to many rumors about a blackberry tie-up. but lenovo's asia pacific president tells cnbc there is no pressure for a deal. >> there are opportunities, we'll dive into them and analyze them, but we're not in need of having to acquire or merge or joint venture with another company in order to be successful, which we have proven. and five years ago, no one in the world i believe would have predicted we would have gotten to number one in the pc business and we did. i will predict that five years from now, you know, the same thing could happen in the smartphone space and organically, but we will surprise the world. >> cnbc also spoke with dell's president and chief commercial officer steve feliz about the decline in the market and why the company is pinning its hopes on enterprise and solution software to go forward. >> that's where we're spending all our time and effort and investment too in a number of
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acquisitions, all aimed at helping institutions around the world build a more efficient and effective data center, so they can compete effectively in any industry they're in. >> yet, steve, pc sales, which we know have been on a one way trajectory of late, 50% of your revenue as well. you expect that decline in pc sales to continue given where you're putting all your energies? >> well, we're going to continue in our transformation, and regardless of what is happening in the pc sector, we're going to continue to invest in the enterprise, our server performance has been terrific, our networking growth, our services growth. but pc business is in a cyclical decline right now. we really believe most of that has to do with the global economic conditions. these are still great productivity tools, and most of the an lalytical organizations project that pcs will grow over the next coming five years.
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it is a sluggish market. we're dealing with that, competing effectively. but it does take its toll on the business. however, we're staying steadfast in investing in our future. >> here is a quick look at european markets for you, which are seeing a lot of selling pressure this morning on the back of weakness in the u.s. and asia. the ftse 100 off by .7%. some of the basic resources stocks hitting that specific sector, we just talked about glencore. xstrata -- sorry, xetra dax is off by 1.3%. the cac 40 seeing bigger losses. the ftse mib, biggest decliner in yesterday's session in europe, off by another 1.6%. this is partly related to some political uncertainty in that country. and the bond markets, yields have come down just a touch. the ten-year bond at 1.86% in terms of the yield. the ten-year treasury yield at 2.8%, hit 2.9%, inching ever
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closer to the 3% level but yields came down a little bit ahead of the fomc minutes tomorrow and ten-year gilts 259259 at 2.71%. dollar yen is down to 97.21. euro dollar up at 1.3377. sterling dollar, a lift from the mortgage lending data that we just got out. 1.5673 is the level there, up by .2% on the day. we saw uk mortgage lending, the strongest since october of 2008. the indian rupee continues to slide, expending a series of record lows and crossing 64 to the u.s. dollar. with more, let's get out to ekta in mumbai. it seems as though the rbi is doing everything it can to stem the decline. it sis simply not successful in
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its move. >> absolutely. it more or less seems more like a global market or global emerging market phenomenon, so maybe the indian rupee is a part of a big tidal wave in terms of the currency situation across the emerging markets. we have seen the rupee decline significantly. we have seen the brazilian real decline from the start of this year, where as the rupee is down now between 14 or 15%. it seems like maybe there is some sort of correlation taking place on the current account deficits, economies, along with the economy and hence any sort of qe tapering is resulting in the declines that we're seeing. not to mention that the fomc minutes do come out, more for the july 31st meeting and hence all eyes will be on any sort of cue we could get from that. otherwise, it is a bit of a increase that we saw in the
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equity markets as well. clawed back to 5400 at this point. and just your point on the rbi actually doing all it can with regards to the einar. there have been downgrades which have come in. jpmorgan, we understand, did downgrade india this morning. but it seems like with more opinion seems to be deviating to the fact that we can only control the volatility as opposed to the trend of the einar which seems to be on the downside. back to you. >> thank you for that. you're absolutely right. there is only so much the rbi can do in the face of fed tapering. other emerging markets continue to be punished today as investors fear the onset of the set taper. perhaps no country has felt more pain than indonesia. at least over the last few days. its main stock market, the jakarta composite is down 10% over the past two days alone. its currency has been hitting
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four-year lows against the u.s. dollar. indonesia's central bank may continue tightening, say analysts, to prop up the rupee and keep a lid on inflation. frederick newman is at hsbc and joins us now from hong kong. frederick, thank you for taking the time to speak to us. the selling in indonesia, is it overdone? is it panic selling? >> i think to some degree yes. and certainly there is a lot of spillover here, if you will, contagion from india. people are reassessing the fundamentals in emerging markets, but i'm not quite convinced that indonesia is really in such a challenging state as the markets currently suggest. >> still, if you look at its current account deficit of gdp, 4.4%, india is at 4.8%, the two aren't really that far apart. and we know that the markets have been really focusing on those countries and emerging asia with those very, very weak,
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very high current account deficits. >> that's right. so the current account deficit is currently the focus of the market and globally, i think, its current account deficit countries didn't get hit the most. remember that indonesia's current account deficit is also showing signs of narrowing quite rapidly. it is due to some one off factors that really expanded. it is now coming back in. but more importantly, i think, india, for example, the underlying growth fundamentals in indonesia still are fairly robust. the economy continues to grow at 5% to 6%. hasn't really slowed down all that much. came through the global finance crisis quite well, and leveraged overall in indonesia remains remarkably low by regional standards. >> so you would argue that indonesia is going to be bouncing back from that temporary weakness a lot quicker than india, for example, partly because india, of course, is very reliant on energy imports.
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but indonesia isn't? >> yeah, indonesia is a bit of a mixed bag. they export crude oil, but they import refined products, so there is some exposure on a net basis to weaker currency. but nowhere near as large as india. you're right, oil imports are very important. but i think the market apart from the current account issues also really wants to see structural reforms in india. they want to see an aggressive reform program and only that will convince capital to come back and force the finance of current account deficit. in indonesia, we don't have such an overarking reform process, daunt league foing reform proce rdr will stabilize and more quickly than inr but it will be quite volatile until the dust settles from the tapering talk.
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>> do you think the sell-off is confined to indonesia and india for now? malaysia is coming out with its current account data on thursday. the philippines markets will open at some point this week. do you believe that we could be seeing more bloodshed in terms of those emerging asian markets? >> i think now we are in the process where markets are very jittery. liquidity is low. it is in august. we get, you know, we have tapering in the west to contend with. we have discouraging data out of not just india, but across the region really. and so contagion will make itself felt across the region. i think some of the currencies will be dragged into that as well. again, it is important to differentiate among emerging markets. the philippines, for example, looks much more robust and indonesia does or even india. and malaysia, the fundamentals have deteriorated, i don't think would look as something
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rebounds, payment crisis in malaysia, for example. an adjustment is needed here but it is not necessarily warranted, doesn't warrant panic selling at this point. >> frederick, thank you for those initial thoughts. we'll come back to you at another time. frederick newman, co-head of asian economic research at hsbc. the nikkei dropped a two-month low today as currencies in emerging markets continued to go lower against the dollar. their stock markets fell. with more on the japanese markets, shachiko kishida has more. >> japanese shares closely linked to emerging markets like carmakers were lower in tokyo markets today as investors withdrew from riskier assets. suzuki and yamaha motor dropped almost 8%. isuzu down 6%. and honda fell 4%. as japanese carmakers continue to focus on emerging markets, the depreciation of local
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currencies is casting a shadow on their earnings. some analysts say that the positive impact of the weaker yen against the dollar and the euro is being offset by the softer emerging market currencies. japanese electronicsmaker shares were also lower today. sony down 2.4%. investors fear sinking shaels of digital cameras and computers in emerging markets. sony imports key components to factories in asian region with transactions denominated in the dollar before assembling finished products locally, so the depreciation of the local currency against the dollar pushed down japanesemakers profitability. carolin, back to you. >> thank you for that. still with us is frederick newman, co-head of asian economic research at hsbc. we have seen the strengthening in the japanese yen on the back of the safe haven flows with the sell-off happening elsewhere in asia. how much of a spanner is it in the works for abe economics?
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>> abenomics is clear, the verdict is out on abenomics. i think that the current strength in the yen really is more reflect of global uncertainty, the tapering fears, what is going on in the emerging market, some capital repatriation. but i think you're right to point to some doubt there about abenomics. the market increasingly has started to question his determination in part because of sales tax controversy that we recently had suggested he's back tracking a little bit from his determination to press ahead. i think until we see more clear cut reforms coming out of japan as well, and he will proceed with abenomics, i think the yen will trade sideways without much direction. >> frederick, let's get back to the sell-off we have been seeing in the emerging markets of late. as long as the yield curb in the u.s. continues to steepen, they tick higher and we have seen them approaching 3% in the last couple of trading days, will we
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continue to see that sell-off, that bloodshed? >> well, i think, yes. if you see the curve continue to steepen relentlessly in the u.s., the pressure will be on asian markets that, by and large, trade off of the u.s. curve. but there are few counterveiling factors ultimately. one is that japanese -- the japanese central bank is providing a lot of liquidity. and i'm still amazed at how underappreciated that is in financial markets. we're talking about the bank of japan having committed itself to print virtually the equivalent amount of money that was injected under qe-3. that money will come back into play. and it will help to restrain the backup in yields we see across asia. in the current environment, where there is risk aversion and currencies are weakening dramatically, that is not making itself felt. one stability sets back in, the u.s. curve settles a little bit. i'm convinced some of that
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japanese liquidity will help to lift particularly markets and indonesia should be one of the big beneficiaries of that flow. >> that's the hope there. frederick newman, thank you for that, co-head of asian economic research at hsbc. with indian and ind mission ma indonesian markets looking the most battered, find out why experts are keeping an eye on the malaysian ringet. i want to bring you the results of the spanish 6 and 12 month t-bill auction. spain selling 1.336 billion. and six-month treasury builds, the average yield, 0.38%, versus 0.958% at the previous auction. borrowing costs in the primary markets coming down a tad in line with the previous auctions over the last couple of months. so generally we have seen less
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pressure on these peripherals. spain says the bid to cover ratio for the six-month bill was 2.95 versus 2.5 at the previous auction. that's the trend that we have been seeing as well. lower bid to cover ratios because of that summer low. for the 12-month builds, we saw the bid to cover at 202 versus 2.6 at the previous auction and the yield was 1.253%, versus 1.53% at the previous auction. so lower borrowing costs and slightly lower bid to covers as well. still to come on the show, as the great debate over fracking picks up steam, find out why beer giants are joining the fight. we hear from the german brewers association live from berlin. >> translator: we need to work on it. we're very successful in germany in expanding our existing grid.
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we'll develop a market for conventional power stations and we need a new law for the promotion of renewable energy. it is clear that the main cost driver of energy prices is down to exaggerated support for renewable energy in germany. if we want to keep energy affordable, we need a competitive system. the current one is modeled on a socialist demand economy and we need to get out of it. [ kitt ] you know what's impressive?
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